Employers out of touch with what workers really want

Must move toward performance-based rewards

Recruitment and retention are the buzz words of the day. Ask business decision makers in almost any prominent industry in Canada what their top concerns are, and challenges around managing human capital are bound to rank high on the list.

It’s a not-so-envious time to be in the field of human resources where pressure to attract and retain talent is at an all-time high while the means to do so are limited by just how much companies are willing to invest in bringing in bright, skilled workers, and convincing them to stay.

That level of investment and the priorities of business decision makers may be a key point in Canadian employers’ efforts to court Canada’s best and brightest.

A Towers Watson study released in September shows that when it comes to attracting employees, many employers are vastly out of touch with what prospective talent really wants. The study showed that employers believed the top three drivers of talent attraction were career advancement opportunities, challenging work and an organization’s reputation as a good employer. Meanwhile, what mattered most to prospective employees were base pay/salary, job security and career advancement opportunities.

Employees are pretty rooted in the fundamentals of base pay and job security, and those need to be addressed before they need to be engaged in career development

“We can’t ignore the context we’re in today,” says Tracey Malcolm, a director in talent management at Towers Watson. “Fundamentally, there’s a pervasive context that has touched many generations where family and work are changing. That backdrop… means that employees are pretty rooted in the fundamentals of base pay and job security, and those need to be addressed before they need to be engaged in career development.”

In other words, workers need to know first and foremost they can put food on the table and clothes on their backs before they can really begin to consider how and whether their careers are going to progress within a particular organization. Not surprisingly, base pay/salary was not only the top attractant to prospective employees but also the top retention driver for existing staff.

Fortunately, trends in remuneration are beginning to move in the right direction (at least on the retention side). An Aon Hewitt study released in September shows that while in 2012, 3.3% of companies reported a salary freeze, only 1.7% were projecting a freeze for next year. The 2013 numbers are comparable to wage-freeze levels seen before the recession, which not only indicate that business leaders’ confidence in the economy is growing, but that they’re beginning to heed the Bank of Canada’s call to invest “dead cash” in the human capital they need to improve productivity.

Related

The Aon Hewitt study also noted salary increases for 2013 in the manufacturing sector were projected to be between 3.1% and 3.3% for non-unionized employees but only 2.4% for unionized employees. While the union figure may simply be related to the balance of collective agreements signed well before 2012, they may also reflect a more general movement toward performance-based compensation in non-union environments.

Suzanne Thomson, senior associate at Aon Hewitt, says competitive forces and economic realities are pushing business leaders away from traditional across-the-board, cost of living adjustments (COLAs) in favour of offering increases to those with exemplary performance.

“When you’re dealing with [2.5% or 3% budgets], you have to move away from those across-the-board increases… there’s not enough room to be doing [COLA] and do performance-based recognition.”

Razor Suleman, founder and chairman of Achievers, a company that administers rewards programs on behalf of Canadian businesses and hosts the 50 Most Engaged Workplaces awards competition, says he too has noticed an earnest shift in the way employers reward staff. Specifically, the shift has been a gradual movement away from service-based rewards, ­ which rewards dedication, loyalty and longevity, and toward performance-based methods that reward staff for going above and beyond the call of duty.

If you stay at your company for five years and done your job, that should be a moment of recognition, but there shouldn’t be a reward attached to that

“If you stay at your company for five years and done your job, that should be a moment of recognition, but there shouldn’t be a reward attached to that,” he says, noting that service-based rewards can often generate cultures of entitlement.

“What disengages A performers is when you treat B performers the same as them,” he says.

Interestingly, the Towers Watson study showed 64% of Canadian employers believe their performance management process effecitvely links salary increases to individual performance, but when it comes to linking bonuses to individual performance, they ranked themselves much lower than companies in other parts of the world.

For managers, the risk to switching from service- to performance-based rewards systems lies in inadvertently ostracizing workers who may not necessarily be over-achievers, but who have shown loyalty and commitment and, as a result, have helped to ensure the consistency of operations. To prevent this, they will need to maintain a steady balancing act of rewarding top performers but still recognizing service.

Despite more progressive HR thinking that tenure doesn’t matter, we have a lot of long-term employees

That’s the strategy Karen McKay, vice-president of human resources at Eli Lilly Canada, has implemented. “We’re gravitating more toward the performance awards but we have not stopped our service awards,” she says. “Despite more progressive HR thinking that tenure doesn’t matter, we have a lot of long-term employees.”

To that end, Ms. McKay and her team have developed vehicles to celebrate the inspiring anecdotes that usually emerge from the tales of company veterans. One of those vehicles is a newsletter in which employees with interesting stories are profiled.

“Typically we profile people who have stories to tell or things they have done and have been with the company for a long time.”
In doing so, Eli Lilly — which was one of the winners of Achievers’ 50 Most Engaged Workplaces awards — effectively demonstrates to newer employees that while there is unquestionable value in being loyal and dedicated to an organization, it is not necessary to be with a company for any set period of time before one can be rewarded for his or her achievements.

The result is greater incentive to go beyond one’s specific mandate and seek out efficiencies, innovations and ideas that will ultimately allow the company as a whole to be more productive.

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